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Concerns among CFOs about oil prices, equity markets and consumer demand have declined since the first quarter of 2016, according to Deloitte’s 2016 Q3 CFO Signals™ survey. “However, the survey of 122 CFOs of large North American companies finds that respondents continue to worry about the U.S. election, regulatory, international trade and tax policy, as well as global economic stagnation, low interest rates and falling commodity prices,” says Sanford Cockrell III, national managing partner of the U.S. CFO Program, Deloitte LLP. “Those concerns appear amplified by rising worries about the impacts of Brexit and U.S. elections,” he added.

Indeed, 85% of surveyed CFOs believe the future performance of their company depends at least somewhat on the outcome of the U.S. election, and 57% say the Brexit vote is affecting their business planning (although only 5% cite “strong” effects).

CFOs participating in the survey also appear wary of valuations that have pushed equity markets to historic highs over the third quarter of the year. Seventy-one percent of CFOs believe markets are overvalued, up substantially from 56% in the second-quarter of 2016, which represents a new survey high. Only 4% of surveyed CFOs indicate markets are undervalued, a new survey low.

A Closer Look at What’s Worrying Finance Chiefs

Following are several of the “most worrisome” risks cited in the 2016 Q3 CFO Signals survey.

—Heightened election and policy concerns. Regulatory concerns are again strong and industry dependent. U.S. election worries rose last quarter and increased again this quarter (again with concerns around international trade and tax policy).

—Concerns about broader global economic performance. Concerns about the tenor of the worldwide political environment rose sharply.For several quarters, including 3Q 2016, surveyed CFOs’ concerns have appeared to be shifting from a specific focus on Europe and China to a more generalized focus on global economic stagnation and volatility.

Greg Dickinson

—Moderating concerns about the U.S. economy. While some survey findings—rising concerns about political and policy uncertainty, and lagging business spending, for example—suggest that CFOs see potential risks to future U.S. economic performance, other signs are more positive. With regard to growth in capital investment expectations have been declining for most of the past six years of the survey, and averaged around 4.7% over the past two years. Those expectations recovered to 5.4% in Q2 2016, however, and rose slightly to 5.6% in Q3. “That uptick may be influenced by perceptions that the near-record highs evident in the equity and real estate markets are strengthening consumer sentiment and have been accompanied by mostly positive economic news in Q3,” says Greg Dickinson, managing director, Deloitte LLP, who leads the North American CFO Signals survey.

—Less concern about capital markets, but more about interest rates. While concerns about financial market risk appear to have declined CFOs’ concerns about interest rates, both the possibility of rate increases and the long-term impacts of continuing low rates, rose sharply. Nearly 90% of surveyed CFOs indicate low interest rates are significantly impacting their business planning, and more than 80% say the same for a strong U.S. dollar.

—Falling commodity price worries. After climbing sharply since Q1 2016, worries about oil and other commodity prices fell significantly in Q3. That sentiment comes amid an environment in which oil prices have declined since early June, but are still considerably higher than the beginning of the year.

—Consistent talent challenges. Concerns around securing and retaining key personnel continued in Q3 2016, as did those related to leadership succession. While CFOs indicate talent issues are one of their “most worrisome” risks, the Q3 survey also reveals that only one-quarter of the responding CFOs say they have invested in workforce and talent analytics. About 40% of surveyed CFOs, however, indicate they expect to make such investments in the future.

—Escalating growth and execution concerns: Surveyed CFOs again voice concerns about executing their growth initiatives, innovating and executing against their strategies and plans in the latest survey. Cultural change and replacing retiring talent—and the attendant knowledge that departing employees possess—also was cited as a concern by finance chiefs.

All surveyed CFOs from the Services and Technology sectors cite at least some dependence of their companies’ future performance on the outcome of the U.S. presidential election, with nearly 30% of Technology sector CFOs citing “significant” dependence. More than 20% of respondents from the Technology, Manufacturing and T/M/T sectors indicate the election will have a “significant” or “strong” impact on performance.

With respect to risk analytics, surveyed CFOs in the Financial Services sector note the highest level (64%) of past investment in risk- and assurance-related analytics, and finance chiefs in Healthcare/Pharma note the highest (71%) for future investment.

About the Survey

Each quarter, Deloitte’s CFO Signals tracks the thinking and actions of CFOs representing many of North America’s largest and most influential organizations in four areas: business environment, company priorities and expectations, finance priorities and CFOs’ personal priorities. The CFO Signals survey for the third quarter of 2016 was conducted during the two-week period ended Aug. 19, 2016, with 122 CFOs responding during this time. Of those respondents, 73% are from public companies and 80% from companies with more than $1 billion in annual revenue.

For more information about Deloitte’s CFO Signals, or to inquire about participating in the survey, please contact NACFOSurvey@deloitte.com.

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In the fourth quarter of 2017 monetary policy remained favorable, uncertainty was muted, consumer demand was solid, and, in the U.S., tax reform moved from promise to reality. Little wonder, then, that there are multiple signs of optimism in the latest Global CFO Signals report from Deloitte Touche Tohmatsu Limited. CFOs in the eight regions surveyed expressed positive outlooks about their organizations’ financial prospects, growth metrics, and, in many cases, their countries’ economic outlooks.

Views & Analysis

Culture is often an overlooked foundation of an organization’s strategy and performance. Yet today diagnostic tools, cognitive analytics, risk sensing and other technologies can provide organizations insights into day-to-day risk factors embedded within their cultures. Carey Oven, Deloitte Risk and Financial Advisory partner, Deloitte & Touche LLP, discusses the challenges organizations face in improving their culture risk profile and ways they can help protect their culture and monitor risks that could damage it.

Recent corporate scandals linked to problematic company cultures have led directors to look for ways to better monitor corporate culture, while trying to understand potential risks and address problems before they become a significant challenge. By treating culture risk as part of an integrated process of oversight that addresses strategy, performance, and risk—and taking a proactive and persistent approach—boards can improve their oversight of culture risk. Learn some general approaches to culture risk oversight that management and boards alike should consider.

Traditionally, internal audit (IA) has focused on providing assurance with respect to known risks and the effectiveness of controls in mitigating those risks. Regulators, however, are increasingly interested in an organization’s ability to identify blind spots and other vulnerabilities that may undermine the integrity of the risk management environment, including the risk of misconduct. IA functions can play a pivotal role by substantively testing culture and identifying potential risk-related outliers that may not be visible via other means, such as supervisory frameworks, escalations, compliance assessment and testing, and previous audits.

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